**USD/CAD Price Forecast: Pair Tests Key Resistance at 1.3800 While Eyeing Bullish Breakout**
*Original reporting and analysis by Christian Borjon Valencia – FXStreet*
The USD/CAD currency pair is currently exhibiting signs of strength as it approaches a critical resistance level near the 1.3800 mark. In recent trading sessions, the pair has been consolidating within a defined rectangular range on the daily chart, suggesting a period of indecision in the market. However, with U.S. economic data continuing to outpace expectations and crude oil prices influencing the Canadian dollar’s movement, conditions may be shifting toward a potential bullish breakout.
This article provides a comprehensive breakdown of the current USD/CAD technical setup, key economic drivers influencing price action, and possible future scenarios for the currency pair.
## Overview of USD/CAD Performance
– **Current Price Action**: As of the latest session, USD/CAD is hovering around the 1.3780 area, testing the upper boundary of the rectangle pattern formed on the daily chart.
– **Year-to-date Performance**: The pair has rallied significantly through the first half of the year, showing resilience despite intermittent declines in the U.S. dollar driven by dovish policy expectations and global risk sentiment.
– **Major Resistance Zone**: 1.3800 remains a psychologically important level and a technical ceiling that has capped previous bullish attempts.
## Technical Analysis: Rectangle Pattern in Focus
The USD/CAD pair has been tracing a rectangle pattern since early March, bounded by strong support near 1.3600 and firm resistance around 1.3800.
### Key Technical Highlights:
– **Rectangle Formation**: This pattern suggests a period of consolidation where bears and bulls are in equilibrium. A confirmed breakout from this pattern could signal the next major directional move.
– **Resistance Level**: 1.3800 has been tested multiple times since March but has not sustained a breach on a daily closing basis, reinforcing its significance.
– **Support Level**: The lower end of the rectangle is situated near 1.3600. A breakdown below this level would likely expose the pair to deeper losses.
– **50-day and 200-day Moving Averages**: The 50-day moving average is trending above the 200-day SMA, indicating a bullish long-term signal — commonly referred to as a golden cross.
– **Relative Strength Index (RSI)**: Currently hovering around the neutral 60 mark, the RSI shows bullish momentum without signaling overbought conditions.
### Potential Breakout Scenarios:
– **Bullish Breakout Above 1.3800**:
– Could open the door toward the March 2023 high around 1.3860
– A sustained move beyond 1.3860 might target the psychological 1.3900-1.4000 zone
– Breakout confirmation would require a daily close above 1.3800 with volume support
– **Bearish Rejection at Resistance**:
– A failure to breach 1.3800 might lead to a retest of mid-range support at 1.3700
– Deeper losses could bring 1.3600 back into play, where the lower bound of the rectangle resides
## Fundamental Outlook
USD/CAD dynamics are heavily influenced by diverging monetary policy outlooks between the Federal Reserve and the Bank of Canada (BoC), as well as commodity price movements—particularly crude oil, given the Canadian economy’s heavy reliance on energy exports.
### U.S. Economic Indicators:
– **Stronger U.S. Economic Growth**: Recent GDP statistics show the U.S. economy expanded at a 2.5% annualized rate in the second quarter of 2024, outperforming expectations.
– **Inflation Trends**: The Federal Reserve’s preferred measure, the PCE price index, remains elevated near 3.4%, preventing a dovish pivot in the
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